Indo-Asean FTA set for Jan takeoff
TIMES NEWS NETWORK | MONDAY, MAY 22, 2006
Indo-Asean FTA set for Jan takeoff
G GANAPATHY SUBRAMANIAM
NEW DELHI: Here is the final word on the Indo-Asean free trade agreement (FTA) - bigger than any other trade pact that India has entered into so far.
With the controversy over impact of liberal imports on the Indian farmers and the domestic industry ebbing out, the Prime Minister’s Trade and Economic Relations Committee (TERC) has given the green light for implementation of the FTA with Asean from the beginning of ‘07.
The negative list of items which are not covered under duty concessions resulting from the pact would be reduced to 850 as compared to 1,414 originally proposed by India.
To protect farmers from import competition - an issue highlighted by Congress president Sonia Gandhi - it has been decided to impose tariff-rated quotas (TRQs) for import of palm oil from Malaysia and Indonesia; tea, coffee and pepper from Vietnam; and some manufactured goods from Thailand.
Following TERC’s decision to go ahead with implementation of the FTA from January ‘07, the agriculture ministry and the commerce department have been asked to work out TRQs for the identified items. It is understood that the quota ceilings for these commodities would be finalised in a couple of months.
There was strong pressure from Malaysia and Singapore to prune the negative list, highly-placed government sources said.
The TERC was of the view that not implementing the FTA would lead India to miss the bus on the proposed Pan-Asian Economic Community which also includes a common currency for the Asian region.
Apart from the 850 items on the negative list, all other items would be eligible for concessional import duty in India.
The TERC discussed all issues related to the Asean FTA at a meeting earlier this month and the conclusion was that dynamic effects of increased trade ‘outweigh’ micro considerations like notional revenue loss and impact on domestic industry and farmers due to increased competition.
The observation of the committee was in response to the finance ministry’s view that the estimated revenue loss would be Rs 1,400 crore in the case of palm oil alone even if TRQs are imposed and the reduction in duty is only 50%. India imports more than 5m tonnes of edible oil and the bulk of it comes from Malaysia and Indonesia.
On the domestic industry’s concern that duty concessions to Asean members may result in inverted duty on certain items, TERC has said that such issues should be looked into by the committee set up under Planning Commission member Anwarul Hoda.
The domestic industry is keen to ensure that effective customs duty on raw materials is higher than that of finished goods. While the primary concern over impact on imports from Asean is focused on agri products, India Inc is worried about imports from Thailand and the possibility of Chinese goods entering the country through Asean nations.
Initially, there were suggestions that sensitive items like palm oil, tea, coffee, rubber and pepper should be kept out of the Asean FTA. However, the TERC has recommended their inclusion in the pact since the key criteria of coverage of 80% trade would not be met if these items were kept out.
The framework agreement for India-Asean FTA envisages that tariff concessions should cover at least 80% of the trade between the two sides.
The TERC’s recommendations have cleared all doubts over the Asean FTA, the officials said. Doubts had arisen over implementation of the pact in view of the apprehensions over the impact on domestic industry and farmers.
Congress president Sonia Gandhi had also written to Prime Minister Manmohan Singh about the ramifications of FTA, particularly the proposed pact with Asean, on farmers. The Congress chief had called for safeguards which are being put in place now.
